The Effect Of A Salary Floor In New NFL Collective Bargaining Agreement

One of the many details of a new proposed Collective Bargaining Agreement between the NFL and NFLPA* that was leaked last week is an increase in percentage to the salary floor. In summary, it is a minimum each team must pay in salary, and it is a percentage of the salary cap value. Back in 2009, the CBA called for the floor to be 84% of the salary cap, with no floor on actual cash spent. Teams could play games with the numbers, including bogus "incentives" that both the player and team knew would never get paid out, to reach that 84%.

What leaked out last week was a salary floor percentage very close to 100% in cash, which means teams cannot play funny games with the cap numbers. They'll have to actually spend the money, in real dollars, each and every year. This seems to be a big win for the players, and for the fans, as every team will basically have the exact same salary, and there really cannot be any notoriously cheap or big spending owners. However, owners who have low revenue numbers are not too happy about it. From the ESPN story linked above:

The mandatory minimum spending increase is an element that concerns lower-revenue clubs, sources say.

The higher floor proposal could cause some problems for the lower revenue teams such as the Cincinnati Bengals and the Buffalo Bills. Along with the salary cap, teams have to pay an average of about $27 million a year in benefits.

Now, I'm making a distinction between small market and low revenue, as there is a big difference between the two. Before the start of last season, Forbes listed out the overall value of each franchise, including their annual revenue. For example, both Atlanta (7th largest market) and Detroit (10th largest market) are in the bottom 25% in terms of revenue, and both Bay Area teams, the 49ers and Raiders, are also in the bottom 25%, even though they are the 5th largest NFL market. On the flip side, the Ravens and Colts are the 9th and 10th smallest markets, but both rank in the top 10 of Revenue, so even though they are small market, they are certainly not low revenue.

Just how much money could certain teams lose? Lets take the Buccaneers as an example. USA Today keeps a salary tracker, and the Bucs had the 3rd lowest payroll in the league in 2009 at just $84.5 Million. If you look at their Operating Income in the Forbes list, they made the 4th most money of any team at $56 Million despite being 12th in revenue. This number, however, could be inflated based on sellouts in 2009, which they didn't experience in 2010. It's tough to tell at this point if that'll bounce back after a good season.

Doug Farrar from Yahoo! Sports recently said that the Buccaneers only have $64.4 Million in cash commitments for 2011, meaning they'll need to spend roughly $60 Million to comply with these new proposed rules, and $40 Million more than what they did in 2009. The Glazer family could stand to lose almost 70% of the income they saw in 2009. I'm guessing Mr. Glazer was one of the owners opposed to this part of the new CBA.

Now, the new CBA will also bring about more money for the owners in terms of percentage of revenues, so that value will most likely go up. Add in additional TV revenue they are looking to get, which could be in the neighborhood of $22 Million per team, and it makes up for that additional salary they'll be paying out. It's difficult to make a straight apples-to-apples comparison of 2009-2011 in terms of revenue/salary, because there will be a different distribution of funds, starting at the top.

How will this affect the Colts? For 2011, the Colts will have a good amount of money to spend, which is great for us fans. They only have $73.8 Million in cash committed for 2011, which means they'll have the same $50 Million to spend. Now there's a very good chance Peyton Manning will take up half of that number, but even if they back load the contract a little bit, they could have upwards of $30 Million to spend on Free Agents, both current Colts and FAs from other teams. The Colts have also not been shy in spending money in the past, spending the 9th most money last season at $133.1 Million.

Ultimately, I think the salary floor will be a net positive for all teams, regardless of market size or revenue stream. With the increased spending on salaries, the league should be extremely competitive. I'm of the belief that 'you have to spend money to make money', which several teams just don't do. I believe the best way to make money outside of Dallas, Washington, and New England, is to win games. If the Bills would win 10-11 games, they'd see that revenue go up, thanks to increased ticket sales, merchandise, food/beer, etc.

Winning cures everything, and the fact that teams will now be forced to spend money on players, rather than playing cap games to make it look like they are spending more than they really are, will make the league better, especially for the fans. And that's what we care about, right?

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